City of Portland bond refinancing put off
One of the three bond offerings that the City of Portland had previously announced for the month of the April has been postponed. On the city's bond sale calendar, a $150 million refinancing of outstanding pension bonds has been changed from an April sale date to a date "to be determined."
This isn't the first time in recent months that previously announced Portland bond deals have not materialized as scheduled. Last year, it was announced (page 25 of the pdf file) that there would be a sale of general obligation bonds for "emergency facilities" sometime in the fall. That bond issue never took place, and it since has quietly and entirely disappeared from the public radar screen. The same is true for some central east side urban renewal bonds that were supposed to be sold in "winter 2008"; there is currently pending a $50 million urban renewal bond deal, but it's for downtown, not the east side.
The latest pushback, of the $150 million pension refinancing (not for police and fire pensions, which are completely unfunded, but bonds to pay other city employees' pensions), is a bit surprising. The old bonds that were to be paid off with the refinance proceeds are some of those crazy "auction-rate" securities (adjustable rate loans with a vengeance) that lately have been costing the city outrageous amounts of interest as a result of the cratering of the bond insurance companies who were guaranteeing them. It's not clear whether the city has managed to get the interest rate lowered on the "auction-rate" bonds, at least for the time being, or whether the postponement of the refinancing is prompted by something less benign.
Since no one in the mainstream media gives a darn about this stuff, and the city's disclosure on these deals is less than completely transparent, we'll put in an inquiry to the city's debt manager and report back what we hear.
| Posted at 3:39 AM | Permalink |
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Comments (4)
The G.O. bonds require the assent of the voters, I believe. There has long been talk of "public safety facilities" need for things like computer systems and a training center. This was Potter's baby, maybe it died when he decided not to run for re-election.
Posted by Frank | April 14, 2008 5:59 AM
I do wish there were an upfront and (as good as gold) "price" to obtain insurance (or guarantee) on the speculated (as good as gold) returns on the investment of the proceeds of the pension bonds. These particular proceeds are not used to cover pay-as-you-go pension obligations that are presently due and payable, but due like in five or ten or eighteen years out . . . into the wild blue future.
Suppose I were to lower my expectations and ask that one single feature of the scheme be changed -- allow early pay off of such bonds. . . . Perhaps even from the funds now held in trust by the Oregon Investment Council and the PERB to go on their latest TPG-sponsored, or at least KKR-TPG-inspired, leveraged-investment junket. The money is still there: Isn't it? (We could ask either Mr. Macpherson and/or Mr. Kroger. No?)
I cannot even imagine, as between a futures broker and their client, the broker telling their client that he cannot abide by a client demand to "GET ME OUT!!" immediately . . . as the market is limiting out against their position. (It is the broker, in that context at least, that faces the ultimate risk of losing the shirt and their seat.) I want a happy ending to this particularly sad tale.
Posted by pdxnag | April 14, 2008 10:02 AM
pdxnag - as usual, I cannot understand much of what you write. Probably my fault. I do know this - a couple of junkets to the Investment Derivatives Association national convention don't amount to squat compared to what you, as a Portland resident, owe the future civil service retirees. Just take a look at Jack's debt-O-meter. You could probably shave off some microscopic portion of a penny by slashing a junket or two.
Posted by Frank | April 14, 2008 6:38 PM
I tried to use junket figuratively to symbolize the frivolity of the whole private equity game that the OIC loves to play . . . with other peoples money.
Posted by pdxnag | April 14, 2008 10:52 PM